#52: Open Finance Initiatives in Latin America and the Caribben
W FINTECHS NEWSLETTER #52: Newsbreak
Hi everyone 👋,
This is a short-form analysis edition.
Welcome 👋
👉W Fintechs is a newsletter about fintechs, every Monday at 8:21 a.m. you’ll receive an email about insights and happenings in the universe of fintechs — I usually write in Portuguese.
Colombia 🇨🇴 is the newest country to join the list of Latin American financial systems seeking greater competition and financial inclusion through Open Finance regulated.
Colombia announced on July 25, 2022 amendments to Decree 2,555 of 2010. Decree 1297 of 2022 proposed to add payment initiation as a payment system activity that can be carried out by participants in this sector.
Payment initiators may use the information collected through their activities, provided that they allow third parties access to this information, as well as comply with laws 1,266 of 2008 and 1,581 of 2012 (Data Protection Laws).
Several Latin American and the Caribbean countries are putting in place regulated data-sharing infrastructures. Mexico 🇲🇽 and Brazil 🇧🇷 are the countries with the most advanced stages of implementation.
Mexico 🇲🇽 passed the Law to Regulate Financial Technology Institutions (Fintech Law) in 2018. According to article 76 of the new law, Credit Information Companies (SICs in Spanish) and Clearing Houses will be subject to the rules established by Banxico regarding the exchange of data and information via standardized APIs.
In 2020, Banxico published Circular 2, which established the rules for participation and detailed the requirements for building the APIs.
In the case of Brazil 🇧🇷, our later entry into Open Finance enabled us to collect international hits and misses. Brazil has established a governance model that gives financial sector players a strong voice. This governance ensured that the ecosystem was born with a diverse representation of Interest Groups. Because there was no difference in the weight of the votes, everyone had the same voting power, which made the members of the Deliberative Council reach a consensus.
Other Latin American and the Caribbean countries, in addition to Mexico and Brazil, are debating or implementing regulated Open Finance.
Dominican 🇩🇴 financial regulators, for example, have entered into an agreement with the World Bank to develop Open Finance APIs. Japan will lend its support to the initiative.
Argentina 🇦🇷 is also pursuing Open Finance regulation. I discussed Argentina's financial history as well as its financial innovation ecosystem in a recent edition from W Fintechs (link 👉 here). Implementing a regulated Open Finance ecosystem necessitates collaboration, interaction, and interoperability among different players. I believe that the economic challenges that the country is experiencing make it impossible to mobilize capital, technicians and time for the implementation of an ecosystem with such complexity.
Argentina, on the other hand, has market initiatives such as BIND with Poincenot, and the BCRA recently published Communication A7514, a relevant step towards payment initiation.
Venezuela 🇻🇪, Peru 🇵🇪, and Chile 🇨🇱 are also involved in important discussions about Open Finance. Venezuela 🇻🇪 has established a type of General Law that regulates the fintech sector, allowing new fintechs to emerge. However, technical and participation standards have yet to be established by Venezuelan legislation. Peru 🇵🇪 recently presented an implementation proposal to Congress; Chile 🇨🇱 has some legal provisions that facilitate implementation, which were recently implemented by the Chilean financial regulator. However, the country is debating the implementation of a Fintech Law to address this topic.
While regulators do not directly address the Open Finance implementation, the country's financial industry has banded together to reach an agreement on responsibilities and mechanisms in relation to the practice of Screen-Scraping. Because there is no standard API in place, the primary goal is to make the practice safer for customers and businesses.
Certainly, countries that can learn from the mistakes and successes of international implementation will be able to achieve regulatory goals and create a thriving ecosystem for their citizens.
Best wishes,
Walter Pereira